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2007 (11) TMI 636
The Supreme Court clarified that the appellant was granted relief under clause (c) of Rule 57AC of the Central Excise Rules in a judgment dated May 10, 2007. The I.A. was disposed of.
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2007 (11) TMI 635
The Supreme Court expedited the hearing of a Civil Appeal. The authorities can assess the tax but cannot take coercive steps to recover it from the Respondents. M/s R.K. Colour Lab. was impleaded as a Respondent to the Appeal.
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2007 (11) TMI 634
Issues involved: Non-compliance with pre-deposit order u/s 129E of the Customs Act.
The judgment by the Appellate Tribunal CESTAT AHMEDABAD involved a case where the applicant was directed to deposit an amount of Rs. 30 lakhs within 12 weeks, which was later reduced to Rs. 20 lakhs. The appellant failed to comply with the order despite no stay granted by the Hon'ble High Court of Gujarat. The learned advocate for the appellant mentioned filing a writ petition, but no details or status were provided. As the pre-deposit amount was reduced at the appellant's request, the Tribunal found no justification for non-compliance and dismissed all appeals under Section 129E of the Customs Act.
In summary, the judgment highlighted the importance of complying with pre-deposit orders under the Customs Act and the consequences of failing to do so, even in the presence of pending legal actions.
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2007 (11) TMI 633
Issues Involved:
1. Confiscation of Chinese toys.
2. Burden of proof for non-notified goods u/s 123 of the Customs Act.
3. Legality of the import and possession of the goods.
Summary:
Issue 1: Confiscation of Chinese Toys
The dispute pertains to the confiscation of Chinese origin toys valued at Rs. 94,200/-, which were confiscated by the original adjudicating authority due to the lack of documentary evidence proving legal import. The Commissioner (Appeals) set aside the confiscation, stating that the toys were non-notified under Section 123 of the Customs Act and freely available in the market. The burden of proof for non-notified goods lies with the Revenue, which failed to provide evidence of smuggling.
Issue 2: Burden of Proof for Non-Notified Goods u/s 123 of the Customs Act
The Revenue argued that once the initial onus is discharged, the burden shifts to the possessor of the goods. However, the Tribunal noted that the burden of proving the smuggled nature of non-notified goods rests heavily on the Revenue, which must produce tangible evidence. The failure to produce documents by the appellant does not automatically imply smuggling.
Issue 3: Legality of the Import and Possession of the Goods
The Tribunal observed that toys of Chinese origin are freely imported due to the liberalization of the Import Policy. The appellant's inability to produce purchase bills was not sufficient to conclude that the goods were smuggled. The Tribunal emphasized that legally imported goods are expected to be sold under proper invoices and payment of local taxes, whereas smuggled goods are likely sold without proper documentation.
Separate Judgments:
- Member (Judicial): Archana Wadhwa rejected the Revenue's appeal, stating that the burden of proof for non-notified goods lies with the Revenue, which failed to provide sufficient evidence.
- Member (Technical): C. Satapathy allowed the Revenue's appeal, restoring the order-in-original, arguing that the Customs Authorities had discharged the initial burden of proof and the goods were liable to be confiscated.
- Third Member (Judicial): T. Anjaneyulu agreed with the Member (Judicial), emphasizing that the Department failed to provide prima facie evidence of smuggling and that the burden of proof lies with the Revenue.
Majority Order:
In view of the majority order, the appeal filed by the Revenue is rejected.
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2007 (11) TMI 632
Issues:
Whether a Single Member of the Customs, Excise and Service Tax Appellate Tribunal could have heard and disposed of the appeal filed by the appellant under Section 129C(4) of the Customs Act, 1962.
Analysis:
The High Court considered the substantial question of law regarding the authority of a Single Member of the Tribunal to hear and dispose of the appeal. The Tribunal had imposed a redemption fine of Rs. 15 lakhs and a personal penalty of Rs. 8 lakhs on the appellant for the alleged violation of import rules. Section 129C(4) of the Customs Act was crucial in this case, which allows a single member to handle cases where the penalty involved does not exceed ten lakh rupees. However, in this instance, the redemption fine exceeded the limit, rendering it impermissible for a single member to preside over the appeal.
The Court highlighted the specific provision in Section 129C(4)(c) which restricts the jurisdiction of a single member if the penalty amount surpasses Rs. 10 lakhs. As the redemption fine in this case amounted to Rs. 15 lakhs, the Court concluded that a single member of the Tribunal was not authorized to hear and decide the appeal. Consequently, the Court ruled in favor of the assessee, emphasizing that the matter should be sent back to the Tribunal for a proper disposal on merits in compliance with the law.
In light of the above findings, the Court directed that the bank guarantee provided by the appellant should remain in force until the Tribunal completes the appeal process. The judgment concluded by disposing of the appeal in accordance with the above decisions, highlighting the importance of adhering to the statutory provisions and ensuring a fair and lawful resolution of the case.
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2007 (11) TMI 631
Issues involved: Valuation of closing stock for assessment year 1989-90, legality of addition of profits due to change in valuation method, interpretation of resolution passed by the Board of Directors, consideration of fluctuation in sugar prices, application of principles of law in evaluating stock-in-trade.
In this case, the High Court of Karnataka considered a reference made by the tribunal regarding the legality of upholding the order of the CIT (A) deleting the addition of Rs. 178.33 lakhs representing profits due to a change in the method of valuation of closing stock for the assessment year 1989-90. The assessee, a sugar manufacturer, had evaluated the closing stock by adopting the actual cost price, resulting in a reduction of Rs. 178 lakhs in profit. The assessing officer made an addition of Rs. 178 lakhs, which was later deleted by the first Appellate Commissioner due to fluctuation in sugar prices during the relevant period. The tribunal concurred with this decision, leading to the reference before the High Court.
During the hearing, it was noted that the Board of Directors of the assessing company had passed a resolution stating that the closing stock of sugar should be valued at cost price or market price, whichever is lower. However, it was observed that the assessee did not disclose a true picture of its profits and gains before the assessing officer when adopting the cost price for stock-in-trade valuation. The First Appellate Commissioner and the tribunal did not consider settled principles of law related to the evaluation of stock-in-trade, leading the High Court to opine that a remand to the assessing officer was necessary for further consideration.
As a result, the High Court set aside the orders passed by the authorities below and remanded the matter to the assessing officer for re-consideration. The assessee was granted the liberty to produce additional material, as was the revenue. Additionally, a copy of the order was to be sent to the Tribunal as required under section 269 of the Act.
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2007 (11) TMI 630
The High Court of Karnataka remanded the matter to the assessing officer to decide the legality of the method adopted by the assessee in evaluating the closing stock for the accounting year ending 31st March 1989. The orders passed by authorities below for the assessment year 1990-91 are set aside and the matter is remanded for reconsideration.
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2007 (11) TMI 629
Issues involved: Appeal against orders of CIT(A) for assessment years 1996-97 to 1998-99 regarding penalty u/s 271(l)(c) on disallowance of motor car hire charges and interest expenses.
Interest Expenses Issue:
During assessment, assessee provided share application money to sister concern from loan account, without interest charged. Assessing Officer found nexus between interest paid on loan and money given to sister concern. Disallowance of interest claimed in P&L A/c was made. CIT(A) deleted disallowance. Tribunal upheld Assessing Officer's order. Penalty u/s 271(1)(c) imposed. CIT(A) cancelled penalty, stating no concealment of income, as all primary facts disclosed. Tribunal upheld CIT(A)'s decision.
Motorcar Hire Charges Issue:
Assessee made excess payment for motorcar hire charges. CIT(A) directed recalculation of disallowance, reducing it to &8377; 14,000/-. Penalty u/s 271(1)(c) imposed. CIT(A) upheld penalty, stating excessive claim falls under furnishing inaccurate particulars of income. Tribunal dismissed Revenue's appeal, stating no concealment of income, as all facts disclosed and disallowance based on estimated market rate. Penalty on disallowance deleted.
In conclusion, Tribunal upheld CIT(A)'s decisions on both interest expenses and motorcar hire charges issues, stating no concealment of income in either case. Penalty under u/s 271(1)(c) was not warranted.
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2007 (11) TMI 628
The Karnataka High Court dismissed an appeal by the assessee challenging the Income Tax Appellate Tribunal's order to charge interest under Section 234 of the Income Tax Act. The court found the authorities justified in rejecting the claim and awarding interest due to the retrospective effect of the amendment to Section 234-A of the Act.
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2007 (11) TMI 627
The Supreme Court dismissed the Special Leave Petition after condoning the delay. The citation is 2007 (11) TMI 627 - SC. The High Court reference is 2006 (11) TMI 121 - Delhi High Court. Judges were Mr. S.H. Kapadia & Mr. B. Sudershan Reddy JJ. Petitioners were represented by Mr. Gopal Subramanium, ASG, Mr. T. Srinivasa Murthy, and Mr. B.V. Balaram Das.
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2007 (11) TMI 626
Issues involved: Determination of tax liability on profit derived by the USA branch of the assessee company.
Summary:
The appeal by the Revenue challenges the order related to the assessment year 2003-04, questioning the taxability of the profit earned by the USA branch of the assessee company in India. The main contention was whether the profit derived by the overseas branch should be taxed in India despite being assessed in the USA. The Double Taxation Avoidance Agreement (DTAA) between India and the USA was crucial in determining the tax treatment of the USA branch's profit.
The assessee, being a resident in India, argued that the profit of the USA branch should not be taxed in India again as per the DTAA provisions. The DTAA specified the tax credit method for eliminating double taxation, allowing for a deduction of the income tax paid in the USA from the Indian tax liability. The Revenue contended that the profits of the USA branch should be taxable in India unless the assessee carries on business in the USA through a permanent establishment. The DTAA outlined methods for attributing profits to a permanent establishment and did not exempt such profits from taxation in India.
Ultimately, the Tribunal ruled in favor of the Revenue, upholding the Assessing Officer's application of the tax credit method to avoid double taxation. The appeal of the Revenue was allowed, affirming the tax liability on the profit derived by the USA branch of the assessee company.
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2007 (11) TMI 625
Issues involved:
Appeal against Tribunal's judgment regarding deletion of addition on account of undervaluation of closing stock and unexplained investment in purchase of stock in trade.
Deletion of addition of closing stock:
The Tribunal upheld the deletion of addition of Rs. 3,46,879 made by the AO on account of undervaluation of closing stock, citing the judgment of the Supreme Court in CIT vs. British Paints India Ltd. The High Court concurred with this decision, stating that the findings by the Tribunal and CIT(A) did not require interference, thus ruling in favor of the assessee.
Unexplained investment in stock:
Regarding the unexplained investment in the purchase of stock in trade, the AO added Rs. 2 lakhs as unexplained investment in the assessment for the year 1987-88. However, the CIT(A) reduced this amount to Rs. 88,000 after considering turnover and other factors. The CIT(A) also found that since this investment was already considered in the previous year, there was no need for further addition in the subsequent year. The Tribunal had confusion in deciding whether the amount should be added in the year 1987-88 or 1988-89. Referring to Section 69 of the IT Act, the High Court clarified that the investment made in the financial year 1986-87 should be deemed as income of the assessee for the financial year 1987-88. Therefore, the High Court set aside the Tribunal's decision and ordered the addition for the year 1987-88. Consequently, the amount did not need to be added again in the year 1988-89. As a result, Appeal No. 11 of 2003 was allowed in part, restoring the CIT(A)'s decision for the year 1987-88 and dismissing Appeal No. 13 of 2003.
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2007 (11) TMI 624
Issues involved: Condonation of delay, correctness of deletion by CIT(A), computation of book profit u/s 115J.
The High Court of Calcutta, in the case, perused the application for condonation of delay and allowed the application after being satisfied with the grounds mentioned therein. The Court also examined the order passed by the Tribunal regarding the correctness of the deletion by CIT(A). The Tribunal extensively dealt with all the questions raised, considering the decision of the Hon'ble apex Court in Apollo Tyres Ltd. vs. CIT. The Tribunal's observation emphasized that the AO, while computing the book profits u/s 115J, has limited power and cannot go behind the net profits shown in the P&L account except as provided in the Explanation. The Court agreed with the Tribunal's decision that the AO must accept the authenticity of the accounts maintained in accordance with the provisions of the Companies Act, specifically certified by auditors and approved by the company in the annual general meeting.
The Court found no fault on the part of the Tribunal in deciding the matter and concluded that there was no substantial question of law involved that required further examination by the Court. Consequently, the Court dismissed the application, upholding the Tribunal's decision.
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2007 (11) TMI 623
Clearance of Sulphuric Acid without payment of duty - reversal of CENVAT credit - Rule 6 of Cenvat Credit Rules, 2002 - Held that: - sulphuric acid was cleared without payment of duty under Central Excise (Removal of the Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules 2001. It is noted that chapter X procedure under the erstwhile Central Excise Rules, 1944 was withdrawn in 2001 and the Rules 2001 was introduced - the case of Aureola Chemicals Ltd., vs. CCE, Indore [2004 (1) TMI 244 - CESTAT, NEW DELHI] applicable in the present case, where it was held that rule 57CC of the said erstwhile Rules is not applicable in respect of clearance under chapter X procedure, which is neither exempted goods nor chargeable to Nil rate of duty - demand set aside.
CENVAT credit - whether cenvat credit reversible in respect of common inputs used in generation of steam, which was further used for generation of electricity sold outside the factory? - Held that: - this issue is required to be examined by the Commissioner (Appeals) afresh - matter on remand.
Appeal allowed in part and part matter on remand.
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2007 (11) TMI 622
Taxability of income/interest from investment - Validity and applicability of Circular No. 2 of 2002 - family trust - Method of accounting - Cash Or Mercantile method - addition of notional interest on investment in optionally fully convertible premium note - income from business of manufacturing as well as from dividend and interest - Whether Circular No. 2 of 2002, was applicable retrospectively or prospectively - HELD THAT:- No dispute that till 28th March, 2000, the assessee was following mercantile system of accounting, but at the same time there is no dispute that the assessee had changed the system of accounting from mercantile to cash w.e.f. asst. yr. 2001-02 i.e. w.e.f. 1st April, 2000 and had furnished its return of income for asst. yr. 2001-02 on 31st July, 2001 showing income under the head "Income from other sources" which was consisting of interest on FDs and other interest. The system of accounting employed was clearly stated to be cash against column 11A of Form 3-CD which was required to be furnished along with return under the statutory provisions of Section 44AB of the Act.
It is also an admitted fact that the Revenue had not framed assessment for this assessment year, i.e. no assessment u/s 143(3) or u/s 147 of the Act has been made by the AO. This fact goes to show that the assessee's returned income shown on the cash system of accounting was accepted by virtue of provisions of Section 143(1)(a) of the Act and that being the case the assessee's preference to change the system of accounting from "mercantile" to "cash" for asst. yr. 2001-02 stood accepted.
To conclude, we, provisions relating to system of accounting, are of the opinion that:
(i) Return of income for asst. yr. 2001-02 showing income from other sources on cash system was filed on 31st July, 2001 which stood accepted, though under Section 145(1)(a) of the Act, and this conclusion is on the basis that Revenue had not preferred to make assessment under Section 143(3) of the Act.
(ii) Return of income for asst. yr. 2002-03 showing income from other sources and capital gain on cash system was filed on 9th Aug., 2002 which was again before the date of search and, therefore, system adopted by assessee was not effected by the assessment for block period.
(iii) Similarly, the return of income for asst. yr. 2003-04 showing income from "capital gain" and "other sources" on the basis of "mercantile system" was furnishing on 30th Sept., 2003 before completion of assessment u/s 158BC of the Act and, therefore, system adopted by the assessee for this year was also not effected by the assessment for block period.
(iv) Even otherwise, in our opinion, the change adopted by the assessee in the system of accounting was bona fide because the assessee had ceased to have income from business and has been following the changed system consistently in subsequent years.
Therefore, the assessee on its part; in our opinion, succeeded in establishing the change as bona fide because it has ceased to have any business income and had adopted the change well before the search as well as completion of assessment for block period and also before coming of Circular No. 2 of 2002 on the statute. Since the assessee has followed the same system in all the subsequent years, we see no reason as to why assessee's choice/preference to adopt the changed system of accounting be not accepted. Thus, we are of the opinion that the assessee had right to adopt the changed system of accounting and by changing the system of accounting from mercantile to cash was a bona fide change.
Since we have accepted the assessee's change in system of accounting as "cash system" from "mercantile system", there is no question of taxing the interest or any other income from so-called DDEs including on accrual basis and, therefore, direct the AO to delete all such additions. To be specific, we direct the AO to delete the addition of Rs. 77,95,691.
So far as Revenue's reliance on the Board Circular No. 409 dt. 12th Feb., 1985 which relates to taxability of interest on cumulative deposit schemes of private sector undertakings is concerned, we, after having gone through the same, are of the opinion that this Circular is of no help to the assessee because the issue involved in this circular is quite different than the issue involved in the appeal before us.
Validity of Circular No. 2 of 2002 - We are of the opinion that:
(1) So far as Circular No. 2 of 2002 vis-a-vis to the present assessee, who had subscribed to DDBs for holding the same as investment is concerned, was not applicable either for bonds purchased prior to this circular or purchased after this circular and the reasons for our view, are as under:
(i) In our opinion, results in changing the head of income, at least in case of those persons who were original subscribers to the bonds and were holding the same as investments and, therefore, creates problem instead of mitigating the same and this is supported by the stand of the Board itself whereby the Board has, in para No. 9 of this circular, tried to exempt the so-called small investors. There is no dispute as to the powers of Board to issue a benevolent circular for granting relief to a particular class of assessees, but when a circular is found to treat two assessees differently, then such a circular cannot be said to be circular as per law and at least cannot bind the assessees who are deprived of benefits as a result of such circular.
(ii) So far as binding nature is concerned, first of all, we are of the opinion that it is only benevolent circular which is binding on the authority, but so far assessee is concerned, the assessee can prefer not to take or seek benefits of the circular, irrespective of the fact as to whether the circular is benevolent or not and, therefore, if an assessee chooses not to seek benefit of a circular, the Revenue cannot impose the same.
(iii) So far as appellate authority, Tribunal and Courts are concerned, circulars issued by the Board even if benevolent are not binding.
(iv) So far as press note or release dt. 20th March, 2002 which has been issued by the Board only to clarify the scope of its earlier circular is concerned, is not a press note as understood in the normal parlances because as pleaded by the learned Departmental Representative, the press notes referred to by him are of nature which were released prior to issuance of a particular circular and not to clarify the scope or terms of any circular issued earlier. The press note being captioned as press note/release is nothing new but only a continuation of earlier circular, i.e. Circular No. 2 of 2002 and had just clarified the date of applicability of that circular.
(v) The Revenue's stand that the press note is contradictory to Circular No. 2 of 2002 is also misplaced.
(vi) Since we have held that the press note/release dt. 28th March, 2002 was in continuation of circular itself, it was also binding on the Revenue.
(vii) Even otherwise, even if Revenue's plea that press note/release was not in consonance with the intention of Circular No. 2 of 2002 or was contradictory then also the same, in view of the decision of Hon'ble Supreme Court in the case of CCE v. Dhiren Chemical Industries [2002 (2) TMI 115 - SC ORDER], was binding on the Revenue authorities and, therefore, Revenue authorities should have taken note of it.
(viii) The Revenue's stand that Circular No. 2 of 2002 is retrospective i.e. applicable to bonds purchased prior to this circular also cannot be sustained because this circular is silent with respect to chargeability of income earned prior to date of this circular; meaning thereby that in case where the bonds had been purchased prior to this circular, the income having been arisen (in the light of this circular) remained untaxed. The circular, therefore, speaks of different treatment to the income accrued for earlier years and to accrue in subsequent year. Consequently, this circular cannot be considered to be valid in the eyes of law.
(ix) Looking to the totality of the facts and circumstances of the case, we are, therefore, of the opinion that the Circular No. 2 of 2002 being contrary to the provisions of law providing different treatments to same type of income, providing different treatments to similar income in the hands of different persons, without there being any provisions of law on the point, cannot be held to be binding on the assessee and, hence, we are of the opinion that the income from DDBs was taxable as per first Board's letter dated 12th March, 1996. The additions made by following the Circular No. 2 of 2002 are, therefore, directed to be deleted.
Without prejudice to our aforesaid view, that the Circular No. 2 of 2002 was invalid and could not bind the assessee, we are, further of the opinion that in view of language of para No. 3 of this circular and the press note/release dt. 20th March, 2002, the Circular No. 2 of 2002 was not applicable to the DDBs purchased/subscribed before 15th Feb., 2002 and, therefore addition on account of income from such bonds is deleted.
This disposes of ground Nos. 1, 2 and 3 of the assessee's appeal.
We are of the opinion that the press note dt. 20th March, 1992 being for clarifying the date of applicability of Circular No. 2 of 2002 was not a normal press note, i.e. a press note which is generally issued prior to issuance of a circular, this press note being for clarifying the date of applicability of Circular No. 2 of 2002 was, in our opinion, a part of the circular itself and, therefore, the decision relied upon by the assessee are distinguishable on facts and, hence, not applicable.
Without prejudice to the aforesaid findings, we are, further of the opinion that there being no contract for payment of interest either on accrual basis or on periodical basis, the interest on DDBs could not be taxed on accrual basis and this proposition is supported by the decision of Hon'ble Gujarat High Court in the case of Mohit Marketing Ltd.[2005 (4) TMI 546 - GUJARAT HIGH COURT].
In the result, the appeal of the assessee is partly allowed.
SANJAY ARORA, A.M. - My only point of departure with my learned Brother's order is with "regard to the invalidity of Circular No. 2 of 2002 dt. 15th Feb., 2002 issued by the Central Board of Direct Taxes ('CBDT) u/s 119 of the IT Act, 1961 (the Act').
The circular has also been considered legally susceptible due to it carving out an exception for small investors, defined as one whose aggregate holding all such bonds (i.e., including those acquired prior to 15th Feb., 2002) does not exceed Rs. 1 lac. Once it is recognized, and which is the accepted legal position, that the CBDT has the power u/s 119 of the Act to remove or lessen the rigour of law, the objection would not survive, and becomes binding on the Revenue authorities, even though it may not be in agreement or consistent with the provision of law. Article 14 of the Constitution (equality before law) does not preclude drawing up of classifications; the only qualifying criteria being that the differentiation must be intelligible and, further justifiable on some reasonable and objective basis. The circular states of the same as being guided by the consideration of avoiding hardship to small Investors in benchmarking their investments to market on each valuation date, and has not been known even to be challenged for its validity in any Court of law to date. Also, it may be pertinent to state that the exclusion is only for investors, and not for those who hold the bonds as a trading asset and, further, is at their option. Example of such classification In law, as also under the Act, abound, viz., Section 44AA (maintenance of books of account); Section 44AB (compulsory audit of accounts); Section 44AD; Section 44AE, Section 44AF, etc., each of which has stood the test of time as well as of constitutional challenge in some cases.
Thus, I opine that the impugned Circular (No. 2 of 2002) dt. 15th Feb., 2002 issued by CBDT is a valid circular in the eyes of law. However, since the assessee's appeal would stand allowed on the ground of system of accounting followed by it, this issue, i.e., the validity Of the circular becomes academic in nature for the present appeal.
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2007 (11) TMI 621
Issues involved:
The issues involved in the judgment are related to the disallowance of expenses incurred to earn dividend income under section 14A of the Income Tax Act, 1961 for the assessment year 1999-2000.
Facts and Circumstances:
The appellant, a non-banking finance company engaged in advancing loans and making investments, filed a return of loss for the assessment year 1999-2000. The Assessing Officer (AO) disallowed a significant amount of expenses claimed by the appellant, related to interest income, on the grounds that the excess interest paid over interest earned pertained to funds borrowed for investment yielding exempt dividend income. The Commissioner of Income Tax (Appeals) upheld the AO's decision, leading to the appellant's appeal before the Tribunal.
Preliminary Objection Raised:
During the appeal hearing, the appellant raised a preliminary objection regarding the applicability of section 14A. The appellant argued that the AO's inquiry for disallowance under section 14A during the assessment proceedings under section 143(3) violated the proviso introduced by the Finance Act of 2002. The appellant cited previous decisions to support their contention, while the Departmental Representative referred to a contrary view taken by the Division Bench of Ahmedabad in a similar case.
Decision and Analysis:
The Tribunal considered the rival submissions and analyzed previous decisions. It was noted that the AO's actions did not amount to reassessment or enhancement of assessment but were part of the assessment process under section 143(3) when section 14A was introduced. The Tribunal referred to a decision by the Ahmedabad Division Bench to support its conclusion that the proviso did not apply in the present case. The Tribunal also clarified that the proviso's restriction on reducing a refund already made applied in the context of section 154 of the Act.
Merits of the Disallowance:
Regarding the merits of the disallowance, the Tribunal referred to a Third Member decision that emphasized the need for actual proof of expenditure incurred in relation to earning tax-free income for disallowance under section 14A. Since the AO had made the disallowance based on estimation, the Tribunal decided to set aside the CIT(A)'s order and directed the AO to re-examine the issue in accordance with the Third Member decision.
Conclusion:
The Tribunal allowed the appeal of the appellant for statistical purposes, setting aside the CIT(A)'s order and restoring the issue to the AO for fresh consideration in line with the directions provided. The AO was instructed to give the appellant an opportunity to be heard before making a decision on the issue.
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2007 (11) TMI 620
The appellate tribunal CESTAT Mumbai ruled in favor of the appellant, stating that the proportionate costs of composite material recovered by the company from its dealers do not form part of the transactional value. The decision was based on a previous order in the appellant's own case, leading to the impugned order being set aside and the appeal being allowed.
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2007 (11) TMI 619
Issues involved: Tax case appeals against the order of the Tribunal regarding pre-project expenses for assessment years 1994-95 and 1999-2000.
For assessment year 1994-95: The assessee, Tamilnadu Industrial Investment Corporation Ltd., claimed to write off pre-project expenses for 13 projects in joint venture. The assessing officer disallowed the claim as premature since the projects were yet to come up. Commissioner (Appeals) confirmed the disallowance. The Tribunal, following a previous court decision, held in favor of the assessee, stating that the expenses were allowable as revenue expenditure as they were incidental to the business of promoting new ventures.
For assessment year 1999-2000: The assessee made a similar claim for pre-project expenses, which was allowed by the assessing officer. The Commissioner (Appeals) considered an expenditure on an unsuccessful project written off, but concluded that the issue did not survive as the assessing officer had not made a disallowance as represented by the assessee. The Tribunal, again following the previous court decision, held in favor of the assessee.
Conclusion: The High Court dismissed the appeals, stating that the case was squarely covered by the previous court decision, which held that such expenses were allowable as revenue expenditure. No costs were awarded, and the connected miscellaneous petition was also dismissed.
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2007 (11) TMI 618
Valuation - includibility - freight charges and discounts - whether deduction of equalized freight has to be average equalized freight based on last year's actuals, as held by learned Member (Judicial), or the deduction should be of the actual equalized freight incurred during the particular year, when the assessments are provisional, as held by learned Member(Technical)?
Held that: - in the case of Baroda Electric Meters Ltd. vs. CCE, [1997 (7) TMI 126 - SUPREME COURT OF INDIA], the Hon'ble Supreme court has set aside the finding of the Tribunal that wherever freight actually paid was less than the amount collected by way of freight and transportation charges, the difference was appropriated by the appellant and, therefore, the same would be a part of the assessable value. In other words, the Supreme Court has held that even when the freight actually paid was less than the amount collected by way of freight, and the difference was retained by the appellant, it would still not form part of the assessable value. This being so, the issue stands answered in favour of the assessees.
Appeal dismissed - decided against Revenue.
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2007 (11) TMI 617
Issues Involved:
1. Whether the valuation for stamp duty should be assessed based on the market rate at the time of registration of the sale deed or at the time of the agreement to sell.
2. Interpretation of relevant provisions of the Stamp Act, including Sections 2(12), 3, 17, 27, and 47-A.
3. Whether considerations of hardship or equity should influence the interpretation of a taxing statute.
Issue-Wise Detailed Analysis:
1. Valuation for Stamp Duty:
The primary issue was whether the valuation for stamp duty should be assessed based on the market rate prevailing at the time of registration of the sale deed or at the time when the agreement to sell was entered into. The Court concluded that the market value of the property at the time of the execution of the sale deed is relevant. The Court emphasized that an agreement to sell is not equivalent to a sale, and the stamp duty should be assessed on the market value at the time of the actual sale, not at the time of the agreement or the filing of the suit.
2. Interpretation of the Stamp Act:
The Court analyzed various sections of the Stamp Act to resolve the issue:
- Section 2(12) defines "execution" as "signed" and "signature".
- Section 3 is the charging section, stating that instruments are chargeable with duty as indicated in the Schedule.
- Section 17 mandates that all instruments chargeable with duty and executed in India must be stamped before or at the time of execution.
- Section 27 requires that all facts affecting the chargeability of any instrument with duty must be fully and truly set forth in the instrument.
- Section 47-A allows the registering officer to refer an instrument to the Collector if he believes the market value has not been truly set forth, enabling the Collector to determine the correct market value and assess the duty accordingly.
The Court concluded that the valuation should be based on the market value at the time of the sale deed's execution. The interpretation of "execution" in Section 2(12) and its application in Section 17 supports this conclusion. The Court emphasized that the Stamp Act, being a taxing statute, must be construed strictly without considerations of equity or hardship.
3. Considerations of Hardship or Equity:
The respondent argued that the valuation should be based on the time of the agreement to sell due to the long litigation period, invoking the principle "Actus curie neminem gravabit" (no person shall suffer on account of litigation). However, the Court rejected this argument, stating that a taxing statute must be construed strictly. The Court cited precedents emphasizing that equitable considerations are irrelevant in interpreting taxing statutes. The literal rule of interpretation applies, and the valuation must be based on the market value at the time of the sale deed's execution.
Conclusion:
The Supreme Court set aside the judgments of the learned Single Judge and the Division Bench, holding that the correct market value for stamp duty assessment is the value at the time of the sale deed's execution. The Collector is directed to determine the market value of the property at the date of the document's registration and assess the stamp duty and surcharge accordingly. The appeal by the State was allowed, with no order as to costs.
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